Washington — Since the near meltdown of Wall Street in late 2008, Congress has pledged to tighten regulations on the finance industry. That exercise is now half over, with the House approving a reform package Dec. 11.

With the Senate poised to take up the issue early in 2010, the next questions are: How much more money and influence will the industry expend to try to shape the reform legislation to its liking, and will it succeed?

Industry spending to sway Congress is hardly news, but the scale of such activity surrounding this season’s finance overhaul legislation is extraordinary, even for Washington.

“What’s astonishing to me is that the special interests opposing us contributed to the failure of the financial system. They’re trying to preserve the system that failed, and Congress is listening to them in some respects,” says Ed Mierzwinski, consumer advocate for US PIRG. a public-interest research group.

With the American public still reeling over the loss of trillions in savings and pensions from 2008’s financial fiasco, Wall Street is playing defense – and there’s evidence that its outsized investment in inside politics is paying returns.

The industry, with the help of centrist Democrats, won key concessions – including limits on the power of a new consumer protection agency, preemption of state consumer protection laws, and loopholes in new rules for the $600 trillion derivatives market that helped trigger the crisis and subsequent recession.

Consumer groups say the industry’s campaign contributions to sitting congressmen influenced these outcomes. The 34 House members who offered amendments to weaken consumer protections, for instance, collectively received $3.8 million in campaign funds from the financial sector in 2009, according to analysis by Consumer Watch and the Center for Responsive Politics.

In all, the finance, insurance, and real estate industries spent a record $475 million on campaign contributions to congressional candidates in the 2008 cycle and are ramping up for 2010 midterm elections.

But that’s not the extent of it. Besides campaign contributions, the finance industry – including companies that got billions in taxpayer bailout money because they’re “too big to fail” – spent more than $300 million in 2009 on lobbying to influence the regulatory reforms. Finance retains nearly five lobbyists for every member of Congress.

At the heart of the debate over financial regulation is the fight for consumer protection. Despite its big investment, the finance lobby lost its bid in the House to derail a new Consumer Financial Protection Agency with broad powers to protect consumers from financial products deemed unsafe. The new agency is the centerpiece of the bill that passed the House on Dec. 11, 223 to 202.

When centrist Democrats held up a committee vote on the House Financial Reform bill on Dec. 9, consumer groups cried foul. The committee bill at that point allowed states to impose tougher standards for consumer protection than the federal government does. In opposition, the financial industry lobbied for a uniform federal standard. At the 11th hour, new Democrats, led by Rep. Melissa Bean (D) of Illinois, threatened to tie up debate on the bill unless their provision enabling federal consumer protection laws to preempt stronger state laws was added to the bill.

“There’s a tremendous cost, whether to industry or to consumers, in having different rules across every state to do the same mission,” said Representative Bean in an interview.

Consumer groups and state attorney generals counter that state regulators are an important check on federal regulators, who did not act soon enough to curb abuses that produced the financial crisis.

“The meltdown of the financial institution was also a meltdown of the federal regulators ... that had a big part of this,” says Iowa Attorney General Tom Miller, who worked with House finance panel staff on this issue. “To foreclose the states from doing more is wrong and foolish.”

The compromise worked out with chairman Barney Frank (D) of Massachusetts allows federal regulators to preempt a state law that “materially impairs” the business of a national bank.

Attorney General Miller, in an interview, says that compromise is not too damaging. But “there will clearly be another fight in the Senate,” he adds. “The special interests will try very hard to gain advantage by keeping the states on the sidelines in enforcing the laws. We will fight back as best we can.”

Bean dismisses charges from consumer groups that the $393,000 she received from the financial services industry in 2009 – about half her campaign donations to date – influenced her stance on the bill. “Agreeing with the industry on one thing doesn’t mean that they influenced the whole package,” she says, adding that she actively backed many provisions that banks opposed, including the consumer financial protection agency.

The finance industry also won exemptions to new rules for the vast derivatives market at the center of the financial crisis. Reformers wanted all these unregulated trades to be conducted on public exchanges.

“Thirty percent of the market is completely exempted from any exchange. It’s a huge loophole, and we know that if a certain type of [hedge fund trader] is exempt from oversight, the market is going to gravitate to that to escape regulation,” says Carmen Balber, Washington director for Consumer Watch.

Two key amendments to close those loopholes were defeated in floor votes. Commenting on the role of Wall Street money in affecting these votes, Rep. John Larson (D) of Connecticut, a cosponsor of an amendment to ban “abusive derivatives,” said: “I would never categorize my colleagues’ votes, but it’s another reason why we need campaign finance regulation.” The measure failed 150 to 279.